Black Firms Grow Fast but Lag in Employment Capacity

May 16, 2018

Over the last quarter century, the number of Black-owned businesses has grown at a record pace – nearly four times the rate of white-owned businesses. Unfortunately, the gap in revenue and employment capacity widened between Black-owned firms and those owned by other minorities and whites during the recession and afterward.

In 2015, minorities made up 38.4% of the U.S. population and owned 29.3% of the country’s 27 million non-public small businesses. The minority share of business ownership sounds impressive until it is contrasted to the job-creating capacity of the companies. In 2014, there were 5.2 million nonpublic employer-based small businesses in the country. Of that amount, minorities owned 18.4%, and their firms employed an even smaller share of the workforce.

Whites held 86% of the nation’s employer firms and received 92.5% of the total revenue of all employer firms.  Asians owned 9.8% of employer firms and gained 5.4% of total income; Latinos followed with 5.8% ownership of employer firms and 3.0% of receipts.  Blacks were far behind all groups. They owned just 2.1% of employer firms and received .9% of total revenue. Black firms employed only 1.8% of the total small business workforce.

Best Industries for Black Businesses since the Recession

This segment discusses business Black business performance since the recession ended in 2009. The analysis tracks 1,886 Black-owned firms, and we examined the same company each year. A snapshot was taken in January 2010 and then again in January 2014.

In our sample, which was selected from all firms registered with the federal government, the industry with the most substantial number of Black-owned businesses was Professional, Scientific and Technical Services (33.2%). The sector with the highest average revenue was Electronic Product and Equipment Manufacturing ($7.0 Million). Finally, the industry that experienced the fastest revenue growth was Administrative Support Services (41.2%).

Industry Distribution

The most significant industry concentration of Black-owned businesses was in Professional, Scientific and Technical Services (33.2%). This was followed in respective order by the following industries: Industrial and Commercial Construction (11.1%); Residential Construction (10.7%); Specialty Trades Contracting (9.7%); Textiles, Chemical and Metals Manufacturing (8.5%); Telecommunications, Data Processing and Internet Services (7.2%); Wholesale and Retail Trades (5.3%); Electronic and Equipment Manufacturing (5.1%); Heavy and Civil Engineering Construction (3.3%); Information, and Broadcasting -except Internet (2.2%); Administrative Support Services (1.9%); and lastly Transportation and Warehousing (0.9%).

Largest Average Revenue by Industry

The highest average income, as of January 2014,  for Black-owned businesses, organized in descending order by industry was as follows: Electronic Product and Equipment Manufacturing ($7.0 Million); Industrial and Commercial Construction ($5.4 Million); Information Broadcasting -except Internet ($5.3 million); Heavy and Civil Engineering Construction ($4.4 Million); Textiles, Chemicals and Metal Manufacturing ($4.3 Million); Telecommunications, Data Processing and Internet ($4.3 Million); Residential Construction ($4.3 Million); Wholesale and Retail Trades ($4.2 Million); Transportation and Wholesale Services ($3.8 Million); Administrative Support Services ($2.4 million); Specialty Trades Contracting ($2.1 million); Professional, Scientific and Technical Services ($2.1 million); and finally Finance, Insurance and Real Estate ($1.1 Million).

Fastest Revenue Growth, 2010 – 2014

The industries for Black businesses, ranked by revenue growth were as follows: Administrative Support Services (41.2%); Manufacturing, Textiles, Chemicals and Metals (41.1%); Telecommunications, Data Processing and Internet (35.5%); Industrial and Commercial Construction (30.4%); Heavy and Civil Engineering Construction (25.9%); Specialty Trades Contracting (24.7%); Information, Broadcasting – except Internet (17.9%); Electronic Product and Equipment Manufacturing (8.5%); Transportation and Warehousing (3.9%). Three industries experienced negative revenue growth; they were as follows: Wholesale and Retail Trades (-30.1%); Professional, Scientific and Technical Services (-19.2%); and finally, Residential Construction (-16.8%).

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